Dow Jones analysis: Buying pressure is exhausting

February 25, 2019 | SQUARED DIRECT – US stocks closed higher on Friday with the Dow Index up 0.7%, fueled by advancements on the trade negotiations front.

Fundamental highlights

Over the weekend, China confirmed purchasing $1.2 billion in US goods and President Trump delayed tariffs on China citing “substantial progress” in the trade talks between the two nations, thereby raising investors’ hopes for an impending deal.

While sentiment has improved, the recent rally on the Dow index has reached the overbought threshold and is likely to see an imminent pullback despite fundamental support from a strong US labor market, a perceived dovishness in the Fed and subsiding fears over the trade war that has yet to see resolution.

Dow Jones Technical Analysis

The daily RSI reading has reached overbought conditions suggesting buying pressure is exhausting on the Dow Index. However the uptrend remains intact and a trade through the key resistance level at 26080 would provide a bullish continuation signal with the next target resistance at 26250.

Meanwhile, strong support can be found at the 50-period MA around 25750, and a break below that level would be needed to signal a more bearish picture.

Support: 25910 / 25750

Resistance: 26110 / 26260


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